• Rio Tinto calls for ERA chairman’s head over uranium rehab funding dispute
  • Relationship between Rio and uranium subsidiary turned toxic a week ago over an independent expert’s report posted by ERA

Your ASX large cap mining news for Monday, October 3.

Rio Tinto (ASX:RIO) has faced, dealt with and, equally, mishandled a number of ESG challenges in its long history.

Few are stranger and more fraught than its uranium subsidiary Energy Resources of Australia (ASX:ERA), best described as a money pit.

Until early this year ERA was still selling small quantities of uranium from its Ranger mine in the Northern Territory.

But its location and history are sensitive, and the local traditional owners, the Mirarr people, as well as the Federal Government, want it shut down and rehabilitated to the same standard as the surrounding Kakadu National Park.

The issue is the bill for the clean up keeps going up, currently around $1.6-2.2b and possibly rising, and another entitlement offer is needed to ensure ERA has the liquidity to carry out rehab on the mine.

It all leaves questions about who wants to fund a company which can’t touch its assets.

With uranium experiencing a renaissance of sorts — prices are now three times higher than their cyclical lows of five years ago — there remain minority shareholders who think another asset on the Mirarr’s land, the Jabiluka mine, should be developed to capitalise on the run in uranium prices.

Notably Perth investment identity Willy Packer, whose firm Packer and Co. holds the largest minority stake in ERA at 7.9%.

The matter came to a head last week with the release of an independent expert’s report by Grant Thornton which put a 20.1c per share value on ERA’s stock and suggested the Jabiluka Mine could be developed at the earliest by 2029 with the Mirarr’s approval.

That is never happening, and the contents of the report prompted Rio to fly off the handle, with Australia boss Kellie Parker saying the company would not be paying $122 million to buy out minority shareholders for the purpose of funding the rehabilitation it has promised to complete anyway.


Comes to a head

Two escalations from each side of the dispute this morning, with Rio Tinto calling on ERA’s independent board chairman Peter Mansell to fall on his sword.

They say the Grant Thornton report failed to spell out the Mirarr opposition to developing the Jabiluka mine and has asked ERA’s independent board committee for a “workable plan to fund the increased rehabilitation costs”.

“Our utmost priority and commitment is to the rehabilitation of the Ranger Project Area in a way that is consistent with the wishes of the Mirarr People,” Parker said.

“However, given our recent dealings with the IBC and last week’s release of the Grant Thornton valuation report, we do not believe that can be achieved without renewal within ERA’s board.

“We thank Peter Mansell for his contribution to ERA over many years and acknowledge his efforts to find a funding solution.

“However, there remains a strong difference of opinion between Rio Tinto and the IBC on the terms of rehabilitation funding, with the IBC’s view that successful rehabilitation could underpin potential future growth opportunities, despite the Mirarr People’s long-held opposition to further uranium mining on their country.”

“We look forward to working with ERA to facilitate board renewal and urgently develop a workable plan to fund the increased rehabilitation costs.”

ERA says Mansell as well as independent non-executive directors Paul Dowd and Shane Charles, who make up the IBC, had already advised Rio of their intentions to resign once a funding solution is arrived at.

In light of Rio’s statement though, they have said “the independent directors of ERA do not believe that it is in the best interests of ERA for them to continue to work with Rio Tinto into the future.”

At the same time, ERA has unloaded on what it calls a series of “factual inaccuracies” in media reporting on the dispute, issuing a statement from Grant Thornton that said:

“These sorts of assessments are subjective and this is set out in the report.

“The opposition of the Traditional Owners to the development of the Jabiluka Site is extensively acknowledged and documented in the report. Our report does not suggest the Traditional Owners will change their view or would provide approval.”

Who needs enemies when you have friends like these?


Rio Tinto and ERA share prices today:



Little joy for the mining investor

While ERA is up over 7% on the brou-ha-ha there was little to smile about elsewhere in the mid and large cap mining space, with Materials sagging by more than 0.7%.

The broader ASX 200 fell 0.68%.

Energy was up a spare 0.15%, with Yancoal (ASX:YAL) the main mover after repaying US$1 billion in debt on the back of record coal prices.

That’s a massive US$2.3b repaid in the past 12 months, with only US$792m remaining, leaving Yancoal in a net cash position since July despite large dividend payments this year.

Iluka Resources (ASX:ILU) and gold miners Capricorn (ASX:CMM) and Regis Resources (ASX:RRL) were also in the good books.


Ground Breakers share prices today: